Magazine article Teaching Business & Economics

To Cheat or Not to Cheat?

Magazine article Teaching Business & Economics

To Cheat or Not to Cheat?

Article excerpt

The classical Prisoner's Dilemma can help explain the importance of communication, binding agreements, even trust!

Mention Game Theory and economists remember undergraduate days, struggling with Cournot-Nash and the finer principles of oligopolistic competition. Hardly the stuff of period 8 on Friday afternoon, one might add, as one struggles with weighty questions like 'so do you have to remember which way up these curves go, then?' Nevertheless, the fact is that it is not just 'limited resources' which explain 'the Economic Problem', but limited information in general.

As we sit around the poker table of the world economy, trying to second-guess our rivals by spotting the number of beads of sweat elicited by the picking of the next card, we move from economic certainty to 'animal spirits'. This bit of reality should not be beyond a good A2 level economics set investigating economic decision-making in conditions of uncertainty. Any A Level students worth their salt are, at the time of writing, at least marginally aware that the world's stock markets are in dire straits, traders waiting for the Alan Greenspans or Eddie Georges to 'talk them up' - to inject confidence - as FTSE 100 companies seem to be dropping through the floor. When will the big players start to buy? What do they know that I don't? When will the next WorldCom or Enron hit?

In short, if we ever have to answer the students question 'is economics an art or a science?', then we need only look at how strangely agents can behave with respect to each other, when trust is limited, to see that neat mathematical models remain necessary but not sufficient.

What follows is a slightly adjusted version of Tucker's 'Prisoner's Dilemma' Game which conveys to the A Level student the radical ideas that:

believe it or not, simple economic 'rationality' may not produce the best outcome every time

sharing information and sticking to agreements may yet be best even though cheating and getting away with it can seem good at the time. (You never know, it might even allow you to tick off a Citizenship/PSE box on your ever-increasing cross-- curricular mapping!)

THE GAME

There are two prisoners, both of whom have been arrested for possession of stolen goods. The authorities are on to them both, but in order to charge them with the more serious offence of burglary they need a confession from each of them. Without a confession, they can only hope to charge them with the lesser offence of possession of stolen goods.

The prisoners are held in separate cells for interrogation and are unable to communicate with each other. Each prisoner is told the following:

a) We know you committed the burglary.

b) If you confess and your accomplice does not, you will be freed and your accomplice will be jailed for 20 years.

c) If you each confess, you each get a reduced sentence of 10 years.

d) If neither of you confesses, we have insufficient evidence to jail you for burglary and you will each be jailed for Possession of Stolen Goods - 2 years.

QUESTIONS

1) ASK STUDENTS TO PREPARE AN ANSWER TO THE QUESTION: WHAT SHOULD PRISONER A DO AND WHY? THIS CAN BE DONE IN GROUPS.

YOU MIGHT SUGGEST A MATRIX DESIGN- OR PERHAPS A SERIES OF FLOW CHARTS

THEN ASK THEM:

USING A CARRIER PIGEON, PRISONER B HAS CONVEYED TO PRISONER A HIS WISH NOT TO CONFESS. WHAT SHOULD PRISONER A DO NOW THAT HE BELIEVES THAT B WILL NOT CONFESS?

ISSUES OF TRUST MAY COME UP - LEAVE IT A LITTLE UNCERTAIN . …

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